Health Reimbursement Arrangements – HRA Accounts Explained

A Health Reimbursement Arrangement or HRA is a combination of any
health insurance policy approved for sale as an employee benefit
plan and a separate arrangement to reimburse employees for all
or a portion of the qualified medical expenses not paid by the
health insurance policy. We offer small employer health insurance
plans in the following states:Oregon -
Washington -
Arizona

A Health Reimbursement Arrangement or HRA is a combination of any health
insurance policy approved for sale as an employee benefit plan and a separate
arrangement to reimburse employees for all or a portion of the qualified
medical expenses not paid by the health insurance policy. An HRA is quite
often referred to as a Health Reimbursement Account (Accounts); however it
does not require the establishment of a separate funding account. It is an
arrangement whereby an employer agrees to pay certain medical expenses. When
a Third Party Administrator (TPA) is used, the TPA may establish a small
account on behalf of the employer.

Congress created the HRA as the newest consumer-directed plan designed
to cover medical expenses and it is subject to IRS regulations and
guidelines. While usually a high-deductible plan is chosen for the insurance
portion, there is no requirement to do so, and any approved plan can be used.
The employer determines the reimbursement arrangement.

The HRA is designed for companies employing two or more employees,
excluding sole-proprietors and owners of subchapter-S corporations from
participation. Employer funds are used to reimburse employees for
qualified medical expenses in accordance with the pre-established
employer arrangement. IRS requirements for qualified medical expenses
also apply. Employer payments are a tax-deductible business expense and
reimbursements to employees are tax-free. Availability of plans is
limited to the qualified plans offered by insurance companies conducting
business in your State. PacificSource Health Plans has a qualified HRA
plan and a large selection of insurance plans to choose from, which
ehealthlink.com offers.

Since only employer funds are involved, the employer determines the
amount to reimburse each year, the amount that can be carried over each
year, when to make reimbursements, whether the employee or the employer
pays first, what happens when an employee leaves the company and what
is the maximum an employee can accumulate. The employer may have other
options available to him as well.

Reimburses Employees for Medical Expenses and Allows Carry-over

The arrangement specifies a dollar-limit for the amount of qualified
expenses that will be reimbursed to an employee each year. The arrangement
also usually specifies that any unused allocation of funds can be
accumulated and carried over for use next year. Since the employer owns
the funds until presented with valid receipts, there are no actual funds
accumulated that employees own to rollover to a new employer or take with
them if they leave the company. An employer could continue to reimburse
a former employee if he chooses to do so.

Encourages Employee to Make Wise Health Care Choices

Let's say an employer provides a health plan with a $2,500 deductible
and agrees to reimburse employees up to $1,000 per year for eligible
expenses. If an employee uses this allocation wisely, he may have all or
most of this allocation left to carryover for next year. In three to five
years, the employee could have enough accumulated to pay 100% of the
expenses for any major medical situation that occurs, including the
deductible and co-insurance amounts. On the other hand, an employee,
who because of necessity or over-use spends $2,000 the first year, would
receive $1,000 in reimbursements and would owe $1,000 to health care
providers because the deductible hadn't been met for the year.

Account Administration by the Company or Third Party Administrator

A simple corporate board resolution can be used to establish the
reimbursement arrangement and the company itself can administer it.
Usually a TPA is chosen as the most cost-effective and convenient
method of drafting and administering the arrangement when more than
just a few employees are involved. The TPA collects all the claims,
sends a single monthly bill to the employer and reimburses all the
employees. This could save a considerable amount of time when a single
physician visit with lab tests and x-rays could result in claims from
up to three different healthcare providers all arriving at different
times. PacificSource has partnered with Manley Services, a licensed TPA.

First Choice Health Insurance, Inc
2000 West Harvard Ave. Suite 100, Roseburg, OR 97471Call and One of Our Licensed Agents Will Help You1-888-957-5001
Fax: 541-440-6944
Office Hours:
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